What Happens to Toyota and GM When Their Defective Vehicles are Deadly?

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What Happens to Toyota and GM When Their Defective Vehicles are Deadly?

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CSCS
|March 21, 2014

By: Allan M. Siegel

A few years ago, news of unintended acceleration collisions along with videos of a runaway Prius, Camry, or other Toyota vehicle were splattered across our newsfeeds. Shortly after the story broke, Toyota began issuing massive recalls on over 10 million vehicles. The recalls included defective brakes, gas pedals and floor mats. A criminal investigation was launched to determine whether Toyota followed proper reporting procedures regarding these defects. Subsequently, lawsuits were filed against Toyota by those injured in unintended acceleration collisions. In these suits Toyota blamed the drivers, saying that they hit the gas pedal instead of the brake or blamed the position or construction of the floor mat. Several juries sided with Toyota and initially found the automaker not responsible. When the plaintiffs changed tactics, however, and blamed the vehicle's software system rather than the brake or the gas pedal, the juries stopped siding with Toyota. No recalls regarding the Toyota vehicle's software system have ever issued to date.

After the tide turned against Toyota, it paid out approximately $1 billion dollars in settlements, and it is expected to settle many of the nearly 400 remaining cases that have been consolidated in California state and federal courts. On Wednesday, Attorney General Eric Holder announced that the criminal investigation into Toyota's actions resulted in a $1.2 billion settlement. The Statement of Facts filed in the case noted that a distressed Toyota employee shouted, "Idiots! Someone will go to jail if lies are repeatedly told. I can't support this." According to the Department of Justice, it is now abundantly clear that Toyota concealed the severity and scope of the defects from regulators in its reporting and recall procedures. Attorney General Eric Holder stated, "Toyota confronted a public safety emergency as if it were a simple public relations problem." In its official statement, Toyota stated that it "cooperated with the U.S. Attorney's Office in this matter for more than four years," and that it "made fundamental changes to become a more responsive and customer-focused organization." Toyota has also paid more than $66 million dollars in fines for its delays in the reporting process. Additionally, one of the most important consequences of this settlement is that prosecutors filed criminal charges against Toyota for the fraudulent manner in which it responded to these deadly defects. The charges will be dismissed in three years if Toyota properly complies with safety practices and reporting procedures, and an independent monitor will be on hand to review its actions. So where does all of this leave Toyota? In last quarter alone, it posted a profit of $5.2 billion dollars.

GM is about to face the exact same criminal investigation process for failing to report defective ignition switches that prevented airbags from deploying properly, which has resulted in at least 13 deaths. Sources state that a criminal investigation has already been initiated, though the U.S. Attorney's Office has not yet confirmed this report. GM's stock, however, remains steady even in the face of news that it allegedly failed to report this deadly defect for over a decade. Experts predict that any fall in GM's stock prices, due to this bad press, will only be temporary. The legislature needs to devise appropriate safeguards to prevent delays in the reporting process. When a criminal investigation, bad press, and what most would consider to be massive fines, amount to little more than a slap on the wrist, then the proper incentive is not in place for automakers to adhere to reporting procedures and keep our roads safe.

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